Business Updates: Jobless Claims Rise Slightly
A year after they first rocketed upward, jobless claims may finally be returning to earth.
More than 714,000 people filed for state unemployment benefits last week, the Labor Department said Thursday. That was up modestly from the week before, but still among the lowest weekly totals since the pandemic began.
In addition, 237,000 people filed for Pandemic Unemployment Assistance, a federal program that covers people who don’t qualify for state benefits programs. That number, too, has been falling.
Jobless claims remain high by historical standards, and are far above the norm before the pandemic, when around 200,000 people a week were filing for benefits. Applications have improved only gradually — even after the recent declines, the weekly figure is modestly below where it was last fall.
But economists are optimistic that further improvement is ahead as the vaccine rollout accelerates and more states lift restrictions on business activity. Fewer companies are laying off workers, and hiring has picked up, meaning that people who lose their jobs are more likely to find new ones quickly.
“We could actually finally see the jobless claims numbers come down because there’s enough job creation to offset the layoffs,” said Julia Pollak, a labor economist at the job site ZipRecruiter.
But Ms. Pollak cautioned that benefits applications would not return to normal overnight. Even as many companies resume normal operations, others are discovering that the pandemic has permanently disrupted their business model.
“There are still a lot of business closures and a lot of layoffs that have yet to happen,” she said. “The repercussions of this pandemic are still rippling through this economy.”
The European Central Bank’s chief economist argued on Thursday that fears of a big rise in inflation are overblown, a sign that the people who control interest rates in the eurozone are likely to keep them very low for some time to come.
The comments — by Philip Lane, an influential member of the central bank’s Governing Council whose job includes briefing other members on the economic outlook — are an attempt to calm bond investors who are nervous that the end of the pandemic will lead to high inflation.
Fueling their fears, inflation in the eurozone rose to an annual rate of 1.3 percent in March from 0.9 percent in February, according to official data released on Wednesday, the fastest increase in prices in more than a year.
Market-based interest rates have been rising because investors worry that President Biden’s $2 trillion stimulus program will provoke a broad increase in prices for years to come. The interest rates that prevail on bond markets ripple through the financial system and can make mortgages and other types of borrowing more expensive, creating a drag on economic growth.
Despite big monthly swings in inflation during the last year, the average had been remarkably stable at an annual rate of about 1 percent, Mr. Lane wrote in a blog post on the central bank’s website on Thursday. That is well below the European Central Bank’s target of 2 percent.
“The volatility in inflation over 2020 and 2021 can be attributed to a host of temporary factors that should not affect medium-term inflation dynamics,” Mr. Lane wrote.
That is another way of saying that the European Central Bank is not going to panic about short-lived fluctuations in inflation and put the brakes on the eurozone economy anytime soon.
On the contrary, Mr. Lane’s analysis suggests that the European Central Bank will continue trying to push inflation toward the 2 percent target. In March, the central bank said it would increase its purchases of government and corporate bonds to try to keep a lid on market-based interest rates.
Mr. Lane said it was no surprise to see “considerable volatility in inflation during the pandemic period.” He attributed the ups and downs to quirky factors that are not likely to recur.
Germany and some other countries cut their value-added taxes to encourage consumer spending, then raised them again later. The price of fuel fluctuated wildly. People spent almost nothing on travel, but increased spending on home exercise equipment or products that they needed to work from home. That affected the way inflation is calculated and made the annual rate look higher, Mr. Lane said.
“The medium-term outlook for inflation remains subdued,” he wrote, “and closing the gap to our inflation aim will set the agenda for the Governing Council in the coming years.”
OPEC and its allies, including Russia, are expected to meet by videoconference Thursday to discuss whether to ease production curbs on oil as countries around the world try to expand from pandemic lockdowns.
Analysts say recent events will support the views of Prince Abdulaziz bin Salman, the Saudi oil minister, who has argued for caution in increasing supply, noting the risks of swamping the market. But other outcomes are possible at the meeting of the group known as OPEC Plus, including modest increases and even cuts in oil production,
After modest increases when the Suez Canal was recently blocked by a cargo ship, oil prices were rising again on Thursday, with Brent crude, the global benchmark, about 1.6 percent higher, to $63.75 a barrel.
“All signs seemingly point to the group maintaining current production levels,” Helima Croft, head of commodity strategy at RBC Capital Markets, an investment bank, wrote in a note to clients on Wednesday.
Yet pressure may also come to increase supply. Members of the OPEC Plus group are withholding an estimated eight million barrels of a day, or about 9 percent of current global consumption. As the global economy recovers, it will become increasingly difficult for the Saudis to persuade others to restrain supplies.
Wall Street’s rally continued on Thursday as tech shares extended their gains. Shares in Europe and Asia were also higher, as traders focused on optimism about the economic recovery.
The S&P 500 rose 0.7 percent in early trading, on track for a record close, while the Nasdaq composite gained 1.4 percent.
Bond yields pulled further back from their recent 14-month high. The yield on the 10-year U.S. Treasury note fell to 1.69 percent.
Last week, jobless claims were at the lowest for the pandemic, but economists have warned against assuming this is the new trend because of measurement issues. New data released on Thursday showed a slight rise in claims for unemployment benefits. On Friday, the Labor Department will publish its monthly jobs report for March.
Biden’s Infrastructure Plan
On Wednesday, President Biden laid out a $2 trillion infrastructure plan, which included money for a range of activities, including repairing roads and bridges, building affordable housing and caregiving facilities, and expanding access to broadband. It would be paid for by an increase in corporate taxes, undoing some of the cut by his predecessor, President Donald J. Trump.
The infrastructure plan also includes spending about $50 billion on the semiconductor industry, where a global shortage in chips has disrupted car manufacturing. Shares in Micron Technology, an Idaho-based chip maker, rose nearly 5 percent in premarket trading.
The plan includes $174 billion to encourage the manufacture and purchase of electric vehicles. Tesla shares rose 2.4 percent in early trading and ChargePoint Holdings, which has a large network of electric-vehicle charing stations, rose as much as 14 percent, adding to a 19 percent increase on Wednesday.
Elsewhere in markets
Most European stock indexes were higher even as more lockdowns were announced in the region. In France, restrictions have been expanded to more regions and schools will close for several weeks. In Italy, business closures will extend until the end of April. But a series of reports published on Thursday showed manufacturing activity picking up in Europe.
Oil prices rose ahead of a meeting between the Organization of the Petroleum Exporting Countries and its allies, at which they are set to decide production quotas for May. West Texas Intermediate, the U.S. benchmark, climbed 2.7 percent to just above $60 a barrel.
QuantumScape, a California-based start-up working on a technology that could make batteries cheaper, said it had reached a technical requirement that would clear the way for a $100 million investment by Volkswagen. QuantumScape’s shares jumped 16 percent in early trading.
On Friday, markets will be closed in the United States, Europe and some other countries for Good Friday.
The pandemic has intensified a spotlight on long-running questions about how communities can do a better job supporting seniors who need care but want to live outside a nursing home.
The coronavirus had taken the lives of 181,000 people in U.S. nursing homes, assisted living and other long-term care facilities through last weekend, according to the Kaiser Family Foundation — 33 percent of the national toll.
The occupancy rate in nursing homes in the fourth quarter of 2020 was 75 percent, down 11 percentage points from the first quarter, according to the National Investment Center for Seniors Housing & Care, a research group. The shift may not be permanent, but this much is clear: As the aging of the nation accelerates, most communities need to do much more to become age-friendly, said Jennifer Molinsky, senior research associate at the Joint Center for Housing Studies at Harvard.
“It’s about all the services that people can access, whether that’s the accessibility and affordability of housing, or transportation and supports that can be delivered in the home,” she said.
But there are hurdles for those who wish to stay out of a facility, Mark Miller reports for The New York Times:
A major shortage of age-friendly housing in the United States will present problems for seniors who wish to stay in their homes. By 2034, 34 percent of households will be headed by someone over 65, according to the Harvard center. Yet in 2011, just 3.5 percent of homes had single-floor living, no-step entry and extra-wide halls and doors for wheelchair access, according to Harvard’s latest estimates.
Medicare does not pay for most long-term care services, regardless of where they happen; reimbursement is limited to a person’s first 100 days in a skilled nursing facility. Medicaid, which covers only people with very low incomes, has long been the nation’s largest funder of long-term care. From its inception, the program was required to cover care in nursing facilities but not at home or in a community setting. “There’s a bias toward institutions,” said Judith Solomon, a senior fellow specializing in health at the Center on Budget and Policy Priorities.
A year after the pandemic turned the nation’s digital divide into an education emergency, President Biden is making affordable broadband a top priority, comparing it to the effort to spread electricity across the country. His $2 trillion infrastructure plan, announced on Wednesday, includes $100 billion to extend fast internet access to every home.
The money is meant to improve the economy by enabling all Americans to work, get medical care and take classes from wherever they live. Although the government has spent billions on the digital divide in the past, the efforts have failed to close it partly because people in different areas have different problems. Affordability is the main culprit in urban and suburban areas. In many rural areas, internet service isn’t available at all because of the high costs of installation.
“We’ll make sure every single American has access to high-quality, affordable, high speed internet,” Mr. Biden said in a speech on Wednesday. “And when I say affordable, I mean it. Americans pay too much for internet. We will drive down the price for families who have service now.”
Longtime advocates of universal broadband say the plan, which requires congressional approval, may finally come close to fixing the digital divide, a stubborn problem first identified and named by regulators during the Clinton administration. The plight of unconnected students during the pandemic added urgency.
“This is a vision document that says every American needs access and should have access to affordable broadband,” said Blair Levin, who directed the 2010 National Broadband Plan at the Federal Communications Commission. “And I haven’t heard that before from a White House to date.”
Some advocates for expanded broadband access cautioned that Mr. Biden’s plan might not entirely solve the divide between the digital haves and have-nots.
The plan promises to give priority to municipal and nonprofit broadband providers but would still rely on private companies to install cables and erect cell towers to far reaches of the country. One concern is that the companies won’t consider the effort worth their time, even with all the money earmarked for those projects. During the electrification boom of the 1920s, private providers were reluctant to install poles and string lines hundreds of miles into sparsely populated areas.
Taxpayers who received unemployment benefits last year — but who filed their federal tax returns before a new tax break became available — could receive an automatic refund as early as May, the Internal Revenue Service said on Wednesday.
The latest pandemic relief legislation — signed into law on March 11, in the thick of tax season — made the first $10,200 of unemployment benefits tax-free in 2020 for people with modified adjusted incomes of less than $150,000. (Married taxpayers filing jointly can exclude up to $20,400.)
But some Americans had already filed their tax returns by March and have been waiting for official agency guidance. Millions of U.S. workers filed for unemployment last year, but the I.R.S. said it was still determining how many workers affected by the tax change had already filed their tax returns.
On Wednesday, the I.R.S. confirmed that it would automatically recalculate the correct amount of benefits subject to taxation — and any overpayment will be refunded or applied to any other outstanding taxes owed. The first refunds are expected to be issued in May and will continue into the summer.
The I.R.S. said it would begin processing the simpler returns first, or those eligible for up to $10,200 in excluded benefits, and then would turn to returns for joint filers and others with more complex returns.
There is no need for those affected to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return, the agency said. Those taxpayers may want to review their state tax returns as well, the I.R.S. said.
People who still haven’t filed and expect to do so electronically can simply answer the questions asked by their online tax preparer, which will factor in the new tax break when they file. The agency provided an updated worksheet and additional guidance in March for taxpayers that prefer paper.
Microsoft said Wednesday that it would begin producing more than 120,000 augmented reality headsets for Army soldiers under a contract that could be worth up to $21.9 billion.
The HoloLens headsets use a technology called the Integrated Visual Augmentation System, which will equip soldiers wearing them with night vision, thermal vision and audio communication. The devices also have sensors that help soldiers target opponents in battle.
The deal is likely to create waves inside Microsoft, where some employees have objected to working with the Pentagon. Employees at other big tech companies, like Google, have also rejected what they say is the weaponization of their technology.
But Microsoft has long courted Defense Department work, including a $10 billion contract to build a cloud-computing system. Amazon had been seen as a front-runner to win the contract, but the Defense Department chose Microsoft.
Amazon claimed that President Donald J. Trump had interfered in the process because of his feud with Jeff Bezos, Amazon’s chief executive and the owner of The Washington Post. A legal fight over the contract is still active.
Soldiers have tested the Microsoft headsets for two years, the company said. The Army said the devices would be used in combat and training.
Microsoft said its testing of the headsets had helped the Defense Department’s “efforts to modernize the U.S. military by taking advantage of advanced technology and new innovations not available to military.”
The devices will “provide the improved situational awareness, target engagement and informed decision-making necessary” to overcome current and future adversaries, the Army said in a news release.
In 2018, Microsoft won a $480 million bid to make prototypes of the headsets. The Army said Wednesday that the new contract to produce them on a larger scale was for five years, with the option to add up to five more years.